Dow ends above 11,000

Blue-chip index at 4 1/2-year high; GM rally paces gains

By

MarkCotton

NEW YORK (MarketWatch) -- U.S. stocks ended higher Monday as a more than 7% jump in shares of General Motors Corp. helped the Dow Jones Industrial Average close above 11,000 for the first time in 4 1/2-year years.

The Dow industrials
DJIA, +0.72%
ended up 52.59 points at 11,011.90, the first time the benchmark index has closed above the psychologically key 11,000 mark since June 7 2001. At one stage, the Dow rose as high as 11,020.15.

The Nasdaq Composite Index
$COMPQ
was up 13.07 points at 2,318. The tech-rich index is now at its best levels in nearly 5 years.

"There was a shot of optimism from the Fed minutes and I think that's what has carried the market through so far," said Ed Peters, chief investment officer at Pan Agora, referring to remarks made by Fed officials at its December interest-rate meeting that an end to the central bank's cycle of rate rises is in the offing.

Peters said an end to interest-rate hikes eases fears that the Fed will raise rates too much and choke off growth in corporate earnings.

Commenting on the Dow hitting 11,000, he said it was "psychologically key" for the market.

"Other indexes, like the small caps, have been hitting all-time highs already so this would be good for blue chips and encouraging for everybody."

On the broader market for equities, advancers outpaced decliners by more than two to one on the New York Stock Exchange and by 18 to 11 on Nasdaq.

With the pullback in oil prices, oil services stocks
OSX, +0.91%
was one of the weaker sectors. Utilities
DJU, +0.80%
also ended the session lower.

Volume was 1.67 billion on the Big Board and 2 billion on the Nasdaq.

Dollar, gold, bonds, crude

The dollar came off a two-month low against the yen which came after China said last week it's planning to diversify its currency reserves, boosting the Japanese currency.

Ashraf Laidi, chief currency analyst at MG Financial Group, said that the dollar rose from its lows "because traders know that Japan is going to make cautious remarks on the yen appreciation soon."

According to Laidi, Japanese monetary policy generally favors moderate currency moves and resists both excessively rapid appreciation and depreciation.

The dollar was last off just 0.02% at at 114.44 yen, off a morning low of 113.75. The euro, meanwhile, gave up some of the solid gains it notched last week. The euro was last down 0.6% at $1.2075. See Currencies

Gold futures ended above $550 an ounce, logging their highest close since January 1981, helped by recent dollar weakness. Gold for February delivery was up $9.30 at $550.50 an ounce. See full story.

On the bond market, Treasurys ended unchanged after Federal Reserve officials said inflation expectations should remain anchored and growth should be robust this year. Read Fed officials' remarks

The benchmark 10-year-note ended was at 100 31/32 with a yield of 4.37%. See Bond Report

In a quiet session for data, outstanding U.S. consumer debt fell for the second month in a row in November, the Federal Reserve said. It is the first time in 13 years consumer credit has fallen for two straight months. See full story.

In the energy pits, crude-oil futures eased on forecasts of mild weather for the North-East, with last week's inventory data showing supplies not as tight as anticipated, adding to the pressure on prices.

Also, acting OPEC Secretary-General Mohammed Barkindo said the oil cartel is unlikely to decide on a production cut when it meets on Jan. 31, according to John Gerdes, an analyst at Gerdes Group. In recent weeks, officials from OPEC members, particularly Iran, have called for a 1 million-barrel-per-day output cut

Stocks in play

General Motors Corp.
GM, +3.40%
shot up 7.7% to $22.41, making it the biggest percentage gainer within the Dow industrials. The stock, a drag on the Dow in 2005, was upgraded by Goldman Sachs, which said that dwindling concern about a possible bankruptcy-law filing should lift it back to the mid-$20s by mid-year. Read more

Positive sentiment surrounding the 2006 Detroit Auto Show was also helping the car sector. Ford Motor Co.
F, +1.07%
was up 1.2% at $8.62while shares of DaimlerChrysler AG
DCX
rose 1.4% to $54.55. Read more about the car show

DaimlerChrysler was getting a further boost from a Financial Times Deutschland report that it would consider selling its loss-making Smart car division. Read more

After the bell Monday, Alcoa Inc.
AA, +2.36%
kicked off the earnings season with its fourth-quarter results.

The aluminum producer posted net earnings of 26 cents a share, down from 30 cents a share a year ago. Revenue for the three months ended Dec. 31 totaled $6.67 billion, up from $5.98 billion a year earlier. Analysts polled by Thomson First Call had expected the Pittsburgh-based company to hand in earnings of 37 cents a share on $6.69 billion in revenue. Alcoa, a Dow component, closed ahead of the report at $30.57 a share, up 36 cents, or 1.2%, for the day.

Shares of J.P. Morgan
JPM, +0.43%
rose 1.6% to $40.67 after it and Merrill Lynch
MER, +1.71%
were upgraded by Prudential Equity Group. Prudential cited improving merger and acquisition activity and likely growth in their asset-management and private-equity businesses. Merrill shares were up 1.5% at $69.72. Read the full story.

International Business Machines,
IBM, +0.70%
also in the Dow, fell 1.4% at $83.73. The stock was downgraded to neutral from overweight at J.P. Morgan, with the broker citing risks in services and hardware.

Shares in Boston Scientific
BSX, +0.97%
dipped 36 cents to $25.88 after the company offered up details of its $25 billion bid for fellow medical-devices maker Guidant Corp.
GDT
Guidant shares were up 2.5% at $69. See full story.

In other tech-sector news, Cisco Systems
CSCO, +0.37%
advanced 1.5% to $19.06. That share was boosted to an overweight rating by Prudential.

Shares in Tyco International Ltd.
TYC, +74.50%
climbed 3.5% to $31.04 on a Wall Street Journal report that it is considering a plan that would see its electronics and health-care businesses split off from the rest of the company. See full story.

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